How Market Makers Become Executioners

An increasing number of crypto projects are plummeting uncontrollably, not due to hacks or rug pulls, but because of behind-the-scenes deals with market makers. Mantra (OM) is the most recent victim, and its tale has served as a warning to the industry.

Market Makers: Saviors or Silent Saboteurs?

In traditional finance, market makers are entities that provide liquidity to exchanges, ensuring there are always buyers and sellers for any asset. 

But in crypto – a space still lacking clear standards and transparency, market makers can become the Achilles’ heel of many early-stage projects.

One of the most controversial mechanisms is the “loan option” model – where instead of paying fees upfront, a project allows a market maker to borrow a large amount of tokens, along with the right to buy those tokens at a fixed price in the future.

On paper, the model may sound fair. In reality, many use it as a legal loophole to drain liquidity and crash token prices, hurting the very clients it claims to help.

For example, DWF Labs has faced numerous accusations of aggressively dumping tokens received via loan option agreements. Though they deny using “farm & dump” tactics, many projects follow the same pattern: a quick pump after the partnership, then a sharp, lasting drop.

Gotbit, another well-known market maker, has also faced criticism for running wash trading campaigns and supporting manipulated token launches. Several smaller projects that worked with Gotbit said they felt “abandoned” after their tokens were pumped, dumped, and left with no ongoing support.

Mantra (OM): Not a Rug Pull, But Collapsed by Loan Contract

On April 13, Mantra’s OM token suddenly crashed from over $6 to under $0.45— a staggering 92% drop in just one hour. At first, panic gripped the community with rumors of a rug pull, but insider details soon surfaced, revealing a much deeper story.

The Mantra team stated that the crash began with a wave of forced liquidations during a period of thin market liquidity. Several wallets that used OM as collateral got liquidated, unleashing massive sell pressure and setting off a domino effect. But that was only part of the problem.

Sources later revealed that Mantra had previously signed a loan option agreement with a market maker.

The deal let the market maker buy a large chunk of OM – like 1 million tokens, at a fixed price, say $1 each. On crash day, the deal matured, and the market maker dumped tokens immediately, ignoring the falling price.

That move dealt the final blow, causing OM’s price to plummet further, liquidity to disappear, and leaving retail investors helpless. Though the process may have been contractually legal, it severely damaged the community’s trust in the project.

Learn more: Initia Price Prediction

The incident quickly caught the attention of ZachXBT, a well-known on-chain investigator, who pointed fingers at two individuals allegedly involved:

• Denko Mancheski, founder of Reef Finance
• A wallet under the alias Fukugo Ryōshu. 

Both faced accusations of borrowing large amounts with OM as collateral just before the dump happened.

Meanwhile, major investors like Laser Digital and Shorooq Partners denied involvement, saying they made no OM-related transactions during that period.

Mantra CEO John Mullin launched a burn plan, pledging to destroy team tokens to restore tokenomics.

The price of OM has since recovered to around $0.80, but it remains nearly 90% below its pre-crash peak. Despite this, the community continues to exercise caution, particularly given the overnight loss of many retail investors.

Read more: Mantra Disastrous Meltdown: $5.5 Billion Vanishes Overnight in Collapse Echoing Luna Disaster.

The “Loan Option” Model: A Deal Too Risky?

At first, the loan option model seems ideal — no upfront fees and fast exchange listings through market makers. But the catch lies in this. When market makers aren’t bound to support price or hold long-term, profit-driven dumps can wreck the community.

Worse, many market makers fake demand through wash trading, manipulating prices beyond just providing liquidity.

“If you choose a loan option, you’re basically giving the market maker a red button to nuke your token when the contract ends,” said an engineer from Onchain Bureau at a London panel. “With a retainer—monthly payments— you at least stay in control.”

Mantra’s case isn’t an isolated incident. More market makers exploit loan options, using legal gaps and insider info to dump tokens and exit quietly.

Worse still, most projects keep these terms hidden, leaving retail investors blind to potential token dumps.

Conclusion

The Mantra case warns how secretive market maker deals can quietly erode a project’s integrity. The loan option model offers quick liquidity but leaves startups exposed to long-term, potentially catastrophic risks.

Crypto projects must prioritize transparency, aligned incentives, and risk management over short-term hype. Otherwise, the silent killers lurking in legal fine print will continue to claim victims—one token at a time.

Read more: $OM Token Historic Collapse Unveiled